Despite being the head honcho of Heatec Jietong Holdings Ltd (Heatec), a home-grown leading provider of piping and heat exchanger services, Johnny Soon remains very much a humble and hands-on person, overseeing the day-to-day operations of the company.

Under Johnny Soon’s stewardship, Heatec has flourished from strength to strength throughout these years, supporting the buoyant marine and oil & gas industries. Placing out 18.5 million new shares at $0.275 apiece, the company entered into a new milestone on 8 July by becoming the fourth IPO listed on the Catalist board in 2009.

Braving The Storm
Apart from Teho International, which is still trading barely above water as at the time of writing, the remaining new listings like Japan Foods and Westminster Travel have suffered in terms of their share prices. And against the current tumultuous economic backdrop, kudos must be given to Heatec for pressing ahead with its listing plans, which were in fact conceptualised some two years back.

In a bid to understand more about this new kid on the block and find out how it is coping with the global downturn, we recently paid a visit to Heatec’s Singapore headquarters in Tuas. “We have not to date witnessed any significant adverse impact on our business operations. I think this downturn basically weeds out the weaker players, separating the men from the boys,” Winston Chua, executive director of Heatec told Shares Investment (Singapore) during an exclusive interview.

A proud recipient of numerous certifications as testimony of its commitment to quality and business excellence, Heatec provides services such as pipeline structure, restoration and installation works for all types of pipes and systems to shipyards in Singapore. The company also performs process piping works including pipe fabrication for floating production, storage and offloading (FPSO) turrets.

With regards to its heat exchanger business, Heatec offers on-site inspection and engineering consultancy services, fabrication and restoration of main engine charged air coolers, condensers, heaters, fresh water generators and other heat transfer applications.

“There are a few industry competitors locally but none of them offers a full suite of services like Heatec,” Johnny Soon firmly remarked. More importantly, Heatec enjoys long-standing relationships with Keppel Shipyard and ST Marine, which collectively accounted for approximately 63.5% of the company’s total revenue in FY08.

Not resting on its laurels, Heatec ceaselessly works to learn and improve its service offerings. The company emphasises on continuously updating its internal processes through the practice of ‘Kaizen’, a Japanese production philosophy that loosely translates into continuous improvement or changing for the better.

A charged air cooler generally lasts for 5 years with proper usage

Over the past 3 financial years, Heatec’s top and bottom lines have grown at a commendable CAGR of 44.4% and 36.5% respectively. For FY08, the company chalked up net earnings of $6.6 million, a 26.9% year-on-year increase from the previous corresponding period. This was achieved on the back of a 34.2% revenue jump to $46.5 million, primarily due to new customers and strong demand in both of its business segments. Overall gross margin stood at a healthy 38.9%. As at 31 December 2008, cash and bank balances amounted to $1.2 million, with current ratio at 1.6 times.
Eyeing Sustainable Growth
To maintain its growth momentum, Heatec has earmarked $1.5 million of the net listing proceeds to organically expand its piping business through adding new services. This includes a proposed foray into the area of turnkey project management and construction.

According to the Economic Development Board, our nation’s chemical industry has exhibited robust growth with a CAGR of 20% since 2000, presenting a major opportunity for Heatec to diversify into new promising areas such as land-based heat exchangers.

As such, another $1.5 million has been set aside to enlarge the scope of the company’s heat exchanger business to include land-based heat exchangers such as industrial and hygiene plate heat exchanger servicing as well as heat exchanger manufacturing services. On the geographical front, Heatec intends to increase its market share and further enlarge its customer base in Asia, Europe, the Middle East, the PRC and the United States.

While economic conditions worldwide remain uncertain in the near-term, the increasing world oil & gas demand should continue to drive the demand and growth of the marine and oil & gas industries, in turn boosting the demand for specialised piping works. And with Singapore occupying the enviable position as the world leader in jackup rigs and the conversion of supertankers to FPSO vessels, Heatec appears poised to reap the benefits, attributable to the solid foundation that Johnny Soon and his capable team have steadily laid down all these years.

What is a heat exchanger?
Heat exchangers are used for different purposes, such as:

To cool air leaving a turbocharger in a ship, thus providing additional airflow into the engine and ensuring more efficient combustion.

To heat up cargo and fuel oil in a ship, allowing the oil to flow more quickly and smoothly from fuel tanks to the engine.

To produce fresh water from sea water by way of evaporation and condensation in a freshwater generator unit.